China Fallout

Will the Democratic Party's divisions over the China/ WTO vote prove fatal? For the sputtering Gore campaign, the timing could hardly be worse. The scenario recalls the 1994 NAFTA split prefiguring the party's defeat in the 1994 midterm elections. In both cases, President Clinton depended heavily on Republican allies to win an agenda shaped by global business and opposed by labor and most Democratic congressmen. In both cases, the fight left a bitter taste and diverted precious resources and passions needed for November. This time, the stakes are higher: not just Congress, but the presidency.

Now, the labor movement is more powerful politically. As many as three major unions--the Auto Workers, Steelworkers, and Teamsters--may sit on their hands or even endorse a third-party candidate.

AFL-CIO President John Sweeney hopes to quickly switch gears and convert the labor movement into a general election machine for Al Gore. But having defined regulation of global commerce as its top priority and having mobilized its membership, labor may not so easily rouse rank-and-file passions for Gore, who is having difficulty rousing much passion in any quarter. In the primary contest against the diffident Bill Bradley, the team of Tony Coelho as business Democrat and money man par excellence, the Democratic Leadership Council as ideologist, and some of the party's best pure technicians, momentarily inflated Gore. But this is still a political democracy, and at the end of the day, the candidate has to ignite the voters--or not.

Whatever happened to John Maynard Keynes? Presumably, if deficits stimulate the economy, don't surpluses do the reverse? Not exactly. Keynes never argued for chronic deficits. His point, rather, was that when the economy was depressed, it could get stuck in a false equilibrium where supply could rendezvous with demand, but at high levels of unemployment and stagnant growth. In depressions, consumers failed to spend, and businesses failed to invest. The only way to stimulate economic activity was through government deficit spending and public works. The Great Depression, followed by the massive public spending and investment of World War II, proved Keynes's point.

Other times, however, the economy has the wind at its back. Today, new technology is providing such a stimulus that the economy seems impregnable, even to the Fed's higher interest rates. The current economy does not need macroeconomic stimulus. But it surely needs public investment--in everything from schools to health care to research, infrastructure, and worker training. Government must finance these, not to raise total demand, but because market forces underprovide them. Moderate public debt is a perfectly reasonable way to finance public goods. These two very different uses of deficit spending--stimulus and social outlay--often get conflated, as if the absence of a need for macroeconomic stimulus were reason enough to reduce public investment.

In his idolatry of budget surpluses, candidate Gore makes three terrible mistakes. First, there will be another recession some day, and deficits should not be rendered generally illegitimate. Second, the best way to keep the boom going in the meantime is via investment in more skilled workers to fill all those vacancies that create tight labor markets and frighten the Fed. (How to invest in workers and make work pay is the subject of this special double issue.) Third, by denying himself and his party the public resources with which to be bold, the vice president leaves himself a timid candidate reduced to artifice and cosmetics. Voters notice. ¤

The ballot fraud in North Carolina’s Ninth Congressional District deserves severe punishment—just as Republicans contend. Let’s see if they agree.

About the Author

Robert Kuttner is co-founder and co-editor of The American Prospect, and professor at Brandeis University's Heller School. His latest book is Can Democracy Survive Global Capitalism? In addition to writing for the Prospect, he writes for The Huffington Post, The Boston Globe, and the New York Review of Books.